Advertisements
Advertisements
Question
The following is the balance sheet of James and Justina as on 1.1.2017. They share the profits and losses equally
| Liabilities | ₹ | ₹ | Assets | ₹ |
| Capital accounts: | Building | 70,000 | ||
| James | 40,000 | Stock | 30,000 | |
| Justina | 50,000 | 90,000 | Debtors | 20,000 |
| Creditors | 35,000 | Bank | 15,000 | |
| Reserve fund | 15,000 | Prepaid insurance | 5,000 | |
| 1,40,000 | 1,40,000 |
On the above date, Balan is admitted as a partner with a 1/5 share in future profits. Following are the terms for his admission:
- Balan brings ₹ 25,000 as capital.
- His share of goodwill is ₹ 10,000 and he brings cash for it.
- The assets are to be valued as under:
Building ₹ 80,000; Debtors ₹ 18,000; Stock ₹ 33,000
Prepare necessary ledger accounts and the balance sheet after admission.
Advertisements
Solution
Revaluation Account
| Dr. | Cr. | ||||
| Particulars | ₹ | ₹ | Particulars | ₹ | ₹ |
| To Debtors A/c | 2,000 | By Building A/c | 10,000 | ||
| To profit on revaluation transferred to | By Stock A/c | 3,000 | |||
| James Capital A/c | 5,500 | ||||
| Justina Capital A/c | 5,500 | 11,000 | |||
| 13,000 | 13,000 | ||||
| Dr. | Capital Account | Cr. | |||||
| Particulars | James | Justina | Balan | Particulars | James | Justina | Balan |
| To Balance c/d | 58,000 | 68,000 | 25,000 | By Balance b/d | 40,000 | 50,000 | - |
| By Reserve Fund | 7,500 | 7,500 | - | ||||
| By Bank A/c | - | - | 25,000 | ||||
| By Revaluation | 5,500 | 5,500 | - | ||||
| By Bank A/c (Share Goodwill) |
5,000 | 5,000 | - | ||||
| 58,000 | 68,000 | 25,000 | 58,000 | 68,000 | 25,000 | ||
| By Balance b/d | 58,000 | 68,000 | 25,000 | ||||
| Dr. | Cash Account | Cr. | |
| Particulars | ₹ | Particulars | ₹ |
| To Balance b/d | 15,000 | By Balance c/d | 50,000 |
| To Balan Capital A/c | 25,000 | ||
| To James Capital A/c | 5,000 | ||
| To Justina Capital A/c | 5,000 | ||
| 50,000 | 50,000 | ||
Balance Sheet as on 01.01.2017
| Liabilities | ₹ | ₹ | Assets | ₹ | ₹ |
| Capital Accounts | Building | 7,000 | |||
| James A/c | 58,000 | Add: Appreciation | 10,000 | 80,000 | |
| Justina A/c | 68,000 | Stock | 30,000 | ||
| Balan A/c | 25,000 | 1,51,000 | Add: Appreciation | 3,000 | 33,000 |
| Creditors A/c | 35,000 | Debtors | 20,000 | ||
| (−) Unvalued | 2,000 | 18,000 | |||
| Bank | 50,000 | ||||
| Prepaid insurance | 5,000 | ||||
| 1,86,000 | 1,86,000 |
APPEARS IN
RELATED QUESTIONS
Why does a firm revaluate its assets and reassess its liabilities on retirement or death of a partner?
Find the Odd one.
Vrushali and Leena are equal partners in the business. Their Balance sheet as on 31 March 2018 stood as under.
| Balance Sheet as on 31 March 2018 | |||||
| Liabilities | Amt. (₹) | Amt. (₹) | Assets | Amt. (₹) | Amt. (₹) |
| Sundry Creditors | 90,000 | 90,000 | Cash in Bank | 62,000 | |
| Capitals: | Debtors | 31,000 | |||
| Vrushali | 45,000 | 75,000 | Less: R.D.D | 1,000 | 30,000 |
| Leena | 30,000 | Building | 55,000 | ||
| General Reserves | 18,000 | Machinery | 24,000 | ||
| Bills Receivable | 12,000 | ||||
| 1,83,000 | 1,83,000 | ||||
They decided to admit Aparna on 1st April 2018 on the following terms:
1. The Machinery and Building be depreciated by 10%. Reserve for Doubtful Debts to be increased by ₹ 5,000
2. Bills Receivable are taken over by Vrushali at the discount of 10%
3. Aparna should bring Rs. 60,000 as capital for her 1/4th share in future profits.
4. The capital accounts of all the partners be adjusted in proportion to the new profit-sharing ratio by opening the current accounts of the partners.
Prepare Profit and Loss Adjustment A/c, Partner’s Capital A/c, Balance sheet of the new firm.
Revaluation A/c is a _________.
What would be the journal entry of when excess capital was withdrawn by the partner?
The account which is prepared to adjust the increase or decrease in the value of assets at the time of admission of a partner is called:
Ravi and Gaurav are partners in a firm. They want to admit Dhruv for `1/4`th share in profit. For this, they revalued their machinery from ₹ 30,000 to ₹ 40,000 and creditors from ₹ 1,10,000 to ₹ 1,00,000. What journal entry will be passed:
Balance in the Investment Fluctuation Reserve, after meeting the loss on revaluation of Investments, at the time of admission of a partner will be transferred to:
Ganga and Jamuna are partners sharing profits in the ratio of 2 : 1. They admit Saraswati for 1/5th share in future profits. On the date of admission, Ganga’s capital was ₹ 1,02,000 and Jamuna’s capital was ₹ 73,000. Saraswati brings ₹ 25,000 as her share of goodwill and she agrees to contribute proportionate capital to the new firm. How much capital will be brought by Saraswati?
Hansa and Kavya share profits and losses in the ratio of 3: 2 respectively. Their Balance Sheet as on 31st March, 2023 was as under:
| Balance Sheet as on 31st March, 2023 | |||
| Liabilities | Amount (₹) | Assets | Amount (₹) |
| Bills Payable | 90,000 | Cash at Bank | 1,500 |
| Reserve fund | 60,000 | Sundry Debtors | 1,33,500 |
| Capital A/c: | Stock | 51,000 | |
| Hansa | 2,16,000 | Furniture | 72,000 |
| Kavya | 1,44,000 | Plant | 1,80,000 |
| Building | 72,000 | ||
| 5,10,000 | 5,10,000 | ||
They admit Munir into partnership on 1-4-2023. The terms being that:
(1) He shall have to bring in ₹ 1,20,000 as his Capital for 1/4th share in future profits.
(2) Value of Goodwill of the firm is to be fixed at the average profits for the last three years.
The Profits were:
| 2019-20 | ₹ 96,000 |
| 2020-21 | ₹ 1,62,000 |
| 2021-22 | ₹ 1,47,000 |
(3) Reserve for Doubtful debts is to be created at ₹ 3,000.
(4) Closing stock is valued at ₹ 45,000.
(5) Plant and Building is to be depreciated by 5%.
Prepare Profit and Loss Adjustment Alc, Capital Accounts of Partners and Balance Sheet of the new firm.
